Over the short to medium term, we should expect more sustainable assets. Real estate, after all, accounts for about a third of greenhouse emission in the urban space, and developers and other industry stakeholders, on the back of this COVID pandemic, will take on the responsibility to provide more environmentally and socially sound infrastructure.
The COVID-19 induced global economic contraction has been regarded by the World Bank as the largest economic shock since the Second World War. It not only affected individuals but firms simultaneously as borders closed and global travel was almost annihilated. The realisation that a natural event could bring the global economy to a standstill has motivated regulators and corporations to advance their effort to contain the degradation of our shared environment.
A direct consequence of this current pandemic is a rising demand for green and open spaces and hygiene. Firms have emphasised ESG, primarily driven by the millennials' increasing demand for sustainability-focused investment and value-driven consumption. According to the Sustainable Stock Exchanges, over 50% of the 105 global stock exchanges representing about USD88,230 billion of domestic market capitalisation have issued ESG reporting guidelines.
Over the longer term, the real estate market could move further along the ESG frontier. Carbon neutrality to net-zero carbon in buildings and at the portfolio level should become the norm as governments and corporates focus on the Paris Agreement's goal, driven by a value-conscious populace.
